Britain’s government is on the cusp of telling the Royal Bank of Scotland that it does not need to sell its spin-off Williams & Glyn unit, which was initially a
condition of its massive government bailout in 2008.
The Treasury said in a statement that it “has proposed a radical new plan” that it would allow the bank to provide £750 million in a series of initiatives,that is aiming at boosting “competition in today’s UK business banking market,” after RBS struggled to offload the small-business lender.
A Treasury spokesperson said in a statement:
“RBS must deliver on its remaining State aid commitments and this new plan represents the most effective way of delivering the pro-competition objectives behind them.
“This new plan provides a clear blueprint to increase competition in the UK’s business banking market, and would help RBS resolve one of its most significant legacy issues which has held back the sale of the taxpayers’ stake.”
The £750 million RBS fund is aimed at helping “eligible challenger banks can access to increase their business banking capabilities” as well as incentivising small-to-medium enterprises to “switch their accounts from RBS paid in the form of ‘dowries’ to challenger banks.”
The Treasury also said the measures includes “an independent fund to invest in fintech” that will help widen the types of business banking in the future.
“Today’s proposal would provide a path to increased competition in the SME market place. If agreed it would deliver an outcome on our EC State Aid divestment obligations more quickly and with more certainty than undertaking a difficult and complex sale and would provide much needed certainty for customers and staff,” said Ross McEwan, CEO of RBS.
RBS has struggled to sell it’s W&G unit for years. Initially, when RBS was bailed out by the UK taxpayer for £45 billion from 2008, one of the conditions was that RBS must sell W&G as a condition of returning excess capital and dividends to investors.
The bank is still almost three-quarters owned by the British government, despite the government gradually selling off small portions of the bank in the past two years.
The market volatility around the UK’s vote to leave the European Union helped boost trading activity, as clients sought to hedge their currency and interest rate risks.
Last year, RBS warned that it would fail to meet the initial December 2017 sale deadline.